KORU Medical Systems Announces 2021 First Quarter Financial Results

Rhea-AI Summary

KORU Medical Systems (NASDAQ: KRMD) reported its Q1 2021 results, revealing net revenue of $5.4 million, a 14% decline from $6.3 million in Q1 2020, attributed mainly to decreased sales in novel therapies and pandemic impacts. Gross margin stood at 59.5%, consistent with last year. The company incurred a net loss of $1.3 million, or $(0.03) per diluted share, primarily due to leadership change expenses. Total operating expenses rose to $5.4 million, up from $3.2 million the previous year. Adjusted EBITDA was $(0.4) million, a decrease from $1.3 million in Q1 2020.

Positive

• Sequential quarterly growth in revenue.
• Gross margin maintained at 59.5%.
• New CEO Linda Tharby has significant industry experience.

Negative

• Net revenue decreased 14% YoY.
• Net loss of $1.3 million in Q1 2021.
• Total operating expenses increased by $2.2 million, largely due to leadership changes.

Repro Med Systems, Inc. dba KORU Medical Systems (NASDAQ: KRMD) ("KORU Medical" or the "Company"), a leading medical technology company focused on the development, manufacturing, and commercialization of innovative and easy-to-use specialty infusion solutions that improve quality of life for patients, today reported financial results for the first quarter ended March 31, 2021.

First Quarter 2021 Summary:

• Announced Linda Tharby, med-tech veteran, as President and CEO, effective April 12, 2021
• Recorded solid net revenue of $5.4 million; robust sequential quarterly growth
• Gross margin of 59.5%
• Recorded a net loss of $1.3 million, including leadership change expenses totaling $1.3 million

"I am very excited and grateful for the opportunity to lead KORU Medical in its mission to improve the quality of life of home infusion patients around the globe," said Linda Tharby, KORU Medical's new CEO. "KORU Medical has built a leading market position in a growing home infusion space with its Freedom Integrated Infusion System. I look forward to working with our team in accelerating our growth potential, delivering innovation to our customers, and creating value for shareholders."

"In the first quarter of 2021, we faced difficult year-over-year quarterly revenue comparisons, which included several one-time purchases and a current year COVID-19 impact on new patient starts. I am encouraged by our strong sequential quarterly growth and increasing new pump placements, indicating newly diagnosed SCIg patients returning to pre-COVID levels."

First Quarter 2021 Financial Results

Net sales were $5.4 million for the three months ending March 31, 2021, a 14% decrease from $6.3 million in the same period of 2020, with strong sequential quarterly growth. The decrease was due principally to lower novel therapies sales compared to last year due to a non-recurring clinical trial, lower domestic core pump volume primarily due to ordering patterns, and a one-time pharmaceutical customer pump purchase in the prior year. Domestic core business also reflected a slowdown in the growth of new patient starts for SCIg therapy, as the COVID-19 pandemic continued to delay provider visits and new diagnoses.

International revenues were $1.0 million, flat with prior year.

Gross margin was 59.5% for the first quarter of 2021, roughly equivalent to the same period in 2020.

Total operating expenses for the first quarter of 2021 were $5.4 million, compared to $3.2 million for the same period in 2020. The $2.2 million increase was due principally to expenses of $1.3 million related to leadership changes, which included non-cash equity charges, as well as costs of $0.6 million associated with new hires in the second half of last year to support commercialization, business development, and medical affairs for the Company's novel therapies initiatives.

Net loss for the first quarter of 2021 was $1.3 million, or $(0.03) per diluted share, compared to a net gain of $0.4 million, or $0.01 per diluted share for the same period of 2020. Net loss for the first quarter of 2021 included $1.3 million of recent leadership change expenses, as noted above. On a non-GAAP basis, adjusted diluted earnings per share was $0.00 compared to $0.02 in the same period of 2020.

Non-GAAP adjusted EBITDA for the first quarter of 2021 was $(0.4) million, compared to $1.3 million in the first quarter of 2020.

About KORU Medical Systems

KORU Medical Systems develops, manufactures, and commercializes innovative and easy-to-use specialty infusion solutions that improve quality of life for patients around the world. The FREEDOM Syringe Infusion System currently includes the FREEDOM60^® and FreedomEdge^® Syringe Infusion Drivers, Precision Flow Rate Tubing^™ and HIgH-Flo Subcutaneous Safety Needle Sets^™. These devices are used for infusions administered in the home and alternate care settings. For more information, please visit www.korumedical.com.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. All statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by words such as "may," "look forward" and "confidence." Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, uncertainties associated with the shift to increased healthcare delivery in the home, new patient diagnoses, customer ordering patterns and COVID-19, and those risks and uncertainties included under the captions "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020, which is on file with the SEC and is available on our website at www.korumedical.com/investors and on the SEC website at www.sec.gov. All information provided in this release and in the attachments is as of March 31, 2021. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

REPRO MED SYSTEMS, INC. BALANCE SHEETS (UNAUDITED)
		March 31,				December 31,
		2021				2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	26,774,720			$	27,315,286
Accounts receivable less allowance for doubtful accounts of $24,469 for March 31, 2021, and December 31, 2020, respectively			3,561,341				2,572,954
Inventory			8,058,824				6,829,772
Prepaid expenses			690,325				807,780
TOTAL CURRENT ASSETS			39,085,210				37,525,792
Property and equipment, net			1,154,368				1,167,623
Intangible assets, net of accumulated amortization of $214,969 and $199,899 at March 31, 2021 and December 31, 2020, respectively			844,309				843,587
Operating lease right-of-use assets			201,598				236,846
Deferred income tax assets, net			1,068,485				125,274
Other assets			19,812				19,812
TOTAL ASSETS		$	42,373,782			$	39,918,934
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	1,915,523			$	624,920
Accrued expenses			1,755,800				2,610,413
Accrued payroll and related taxes			715,899				287,130
Finance lease liability – current			1,843				2,646
Operating lease liability – current			141,869				141,293
TOTAL CURRENT LIABILITIES			4,530,934				3,666,402
Operating lease liability, net of current portion			59,729				95,553
TOTAL LIABILITIES			4,590,663				3,761,955
Commitments and contingencies (Refer to Note 3)
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 75,000,000 shares authorized, 47,896,061 and 46,680,119 shares issued; 44,475,559 and 43,259,617 shares outstanding at March 31, 2021, and December 31, 2020, respectively			478,960				466,801
Additional paid-in capital			38,771,105				35,880,986
Treasury stock, 3,420,502 shares and 3,420,502 shares at March 31, 2021 and December 31, 2020, respectively, at cost			(3,843,562	)			(3,843,562	)
Retained earnings			2,376,616				3,652,754
TOTAL STOCKHOLDERS' EQUITY			37,783,119				36,156,979
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	42,373,782			$	39,918,934

REPRO MED SYSTEMS, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
		For the Three Months Ended
		March 31,
		2021				2020
NET SALES		$	5,430,951			$	6,330,009
Cost of goods sold			2,199,097				2,541,799
Gross Profit			3,231,854				3,788,210
OPERATING EXPENSES
Selling, general and administrative			4,992,829				2,862,138
Research and development			336,841				256,025
Depreciation and amortization			115,473				87,224
Total Operating Expenses			5,445,143				3,205,387
Net Operating (Loss)/Profit			(2,213,289	)			582,823
Non-Operating (Expense)/Income
Loss on currency exchange			(15,717	)			(10,497	)
Gain on disposal of fixed asset			736				—
Interest income, net			9,771				19,030
TOTAL OTHER (EXPENSE)/INCOME			(5,210	)			8,533
(LOSS)/INCOME BEFORE TAXES			(2,218,499	)			591,356
Income Tax Benefit/(Expense)			942,361				(141,928	)
NET (LOSS)/INCOME		$	(1,276,138	)		$	449,428
NET (LOSS)/INCOME PER SHARE
Basic		$	(0.03	)		$	0.01
Diluted		$	(0.03	)		$	0.01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic			43,960,936				39,675,107
Diluted			43,960,936				39,874,989

REPRO MED SYSTEMS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
		For the
		Three Months Ended
		March 31,
		2021				2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)/Income		$	(1,276,138	)		$	449,428
Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities:
Stock-based compensation expense			734,184				360,968
Depreciation and amortization			115,473				87,224
Deferred income taxes			(943,211	)			(63,203	)
Gain on disposal of fixed assets			(736	)			—
Changes in operating assets and liabilities:
Increase in accounts receivable			(988,387	)			(185,160	)
Increase in inventory			(1,229,052	)			(700,539	)
Decrease/(Increase) in prepaid expenses and other assets			117,455				(156,288	)
Increase in accounts payable			1,290,603				524,398
Increase in accrued payroll and related taxes			428,769				39,571
Decrease in accrued expenses			(854,613	)			(408,294	)
Increase in accrued tax liability			—				205,131
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES			(2,605,653	)			153,236
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			(95,477	)			(99,591	)
Proceeds from disposal of property and equipment			9,065				—
Purchases of intangible assets			(15,792	)			(80,547	)
NET CASH USED IN INVESTING ACTIVITIES			(102,204	)			(180,138	)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from indebtedness			—				1,500,000
Proceeds from issuance of equity			1,230,000				85,500
Common stock issuance as settlement for litigation			938,094				—
Payments on finance lease liability			(803	)			(1,848	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			2,167,291				1,583,652
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS			(540,566	)			1,556,750
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			27,315,286				5,870,929
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	26,774,720			$	7,427,679
Supplemental Information
Cash paid during the periods for:
Interest		$	28			$	87
Income Taxes		$	850			$	—
Schedule of Non-Cash Operating, Investing and Financing Activities:
Issuance of common stock as compensation		$	56,250			$	60,002
Issuance of common stock as settlement for litigation		$	938,094			$	—

REPRO MED SYSTEMS, INC. SUPPLEMENTAL INFORMATION (UNAUDITED)
		Three Months Ended
Reconciliation of Reported Diluted EPS to		March 31,
Non-GAAP Adjusted Diluted EPS:		2021				2020
Reported Diluted Earnings Per Share		$	(0.03	)		$	0.01
Reorganization Charges			0.02				—
Discontinued Product Expense			—				—
Litigation Expenses			—				—
Manufacturing Initiative Expenses			—				0.01
Reorganization Stock-based Compensation Expense			0.01				—
Tax (Expense) adjustment			—				—
Non-GAAP Adjusted Diluted Earnings Per Share		$	0.00			$	0.02
		Three Months Ended
Reconciliation of GAAP Net (Loss)/Income		March 31,
to Non-GAAP Adjusted EBITDA:		2021				2020
GAAP Net (Loss)/Income		$	(1,276,138	)		$	449,428
Tax (Benefit)/Expense			(942,361	)			141,928
Depreciation/Amortization			115,473				87,224
Interest Income, Net			(9,771	)			(19,030	)
Reorganization Charges			969,274				—
Discontinued Product Expense			—				109,558
Litigation Expenses			—				99,158
Manufacturing Initiative Expenses			51,723				109,803
Stock-based Compensation Expense			734,184				360,968
Non-GAAP Adjusted EBITDA		$	(357,616	)		$	1,339,037

Reorganization Charges. We have excluded the effect of reorganization charges in calculating our non-GAAP measures. We incurred significant expenses in connection with the departure and replacement of our chief executive officer and the recruiting of two new board members, which we would not have otherwise incurred in periods presented as part of our continuing operations.

Discontinued Product Expense. We have excluded the effect of expenses related to a discontinued product line in calculating our non-GAAP measures. We expected to retire our Res-Q-Vac product line towards the end of 2020, but due to the failure of equipment used to manufacture the product, the discontinuation and resulting expense was accelerated into the first quarter of 2020 which we would not have otherwise incurred in periods presented as part of our continuing operations. We did not incur any related expense in 2021.

Litigation. We have excluded litigation expenses in calculating our non-GAAP measures. Litigation expenses in 2020 included professional fees associated with our litigation with EMED, which discontinued as a result of the settlement on May 20, 2020.

Manufacturing Initiative Expenses. We have excluded the effect of expenses related to creating manufacturing efficiencies, in calculating our non-GAAP measures. We incurred expenses in connection with these initiatives which we would not have otherwise incurred in periods presented as part of our continuing operations. We expect to incur related expenses for the next nine to fifteen months.

Stock-based Compensation Expense. We have excluded the effect of stock-based compensation expense in calculating our non-GAAP measures. We record non-cash compensation expense related to grants of options for executives, employees and consultants, and grants of restricted shares to our board of directors. Depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods. Adjusted EBITDA for the three months ended March 31, 2021 included stock-based compensation expense of $0.4 million related to the departure and replacement of our chief executive officer. This expense is included in Reorganization Stock-based Compensation Expense in calculating Adjusted Diluted EPS.

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FAQ

What were KORU Medical Systems' Q1 2021 financial results?

KORU Medical reported Q1 2021 net revenue of $5.4 million, a 14% decrease from $6.3 million in Q1 2020, and a net loss of $1.3 million.

Who is the new CEO of KORU Medical Systems?

Linda Tharby was announced as the new CEO effective April 12, 2021.

What is the gross margin for KORU Medical in Q1 2021?

The gross margin for KORU Medical in Q1 2021 was 59.5%, consistent with the previous year.

How did KORU Medical's operating expenses change in Q1 2021?

Operating expenses increased to $5.4 million in Q1 2021, compared to $3.2 million in Q1 2020.

What factors impacted KORU Medical's revenue in Q1 2021?

Revenue was impacted by lower novel therapy sales, ordering patterns, and delays in new patient starts due to COVID-19.